Sunday, May 27, 2012

How to Read Candlestick Chart?

Stock charts are usually represented with Candlestick chart to show the stock price at a certain period window.

Source: Wikipedia

Black candle means the price opened at the high and closed at the low and the white candle is the other way round. So if you look at the candlestick chart and if there are a lot of the black candles, it basically means that the bears are in control. In other words, the stock trend is moving downward. Similarly if you see a lot of white candles, bulls are in control and stock trend is moving upward. So usually more white, the better!

Candle Stick Components
  • High - The highest price for the period window (e.g. 1 day)
  • Open - Opening price
  • Real Body - Black refer the stock is closed at lower. White refers to the stock is closer at higher.
  • Close - Closing price.
  • Low - The lowest price of the period window (.e.g. 1 day)

Note: The period window could be 1 minute, 5 minutes, 60 minutes, 1 day 1 week, 1 month and so on. It depends on what kind of stock traders you're. For example, 1 minutes and 5 minutes period window will be useful for day traders. 1 day period windows may suitable for traders who do not have time to monitor the stock very closely.  Weekly and monthly will be suitable for long term investor like me. :D

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